Self-employed people are individually missing out on an estimated pension boost of over £90,000 over their working life because they do not benefit from employer contributions, according to the latest research by insurer Prudential.
A typical member of a company pension scheme receives employer pension contributions of £2,232 a year, at 8.4% of annual salary. This amounts to £91,512 over an average working life of 41 years on an average salary of £26,664 a year.
Self-employed people, without access to a company pension scheme, miss out on this substantial sum towards their retirement funding – are they aware of this and are they saving into their pension pot to make up the difference?
A Prudential retirement expert suggested that because many self-employed people have prioritised the needs of their business over saving into a pension they will be relying solely on the state pension in retirement. He also commented that the state pension alone is not enough for a good standard of living in retirement, which is why saving as much as possible into a pension from an early stage is crucial.
Those who are self-employed cannot take advantage of the government’s automatic enrolment scheme, launched in October 2012 to boost workplace saving into pensions. For them, seeking to match pension funding and prospects from within their own self-employment or small business profits, would at these uncertain times appear to be particularly challenging.
If you are self-employed, a first step may be to put increasing your pension pot saving as a priority in your business plan, with help and advice, and look at how this might be done and implemented successfully as soon as possible. There is now a universal and persistent message for everyone yet to retire, irrespective of whether they are employed, self-employed or unemployed – it is ‘save, save, save’, for your pension and a longer life in retirement.
If you want comfort and quality in your retirement, relying on the state pension alone is not an option. In the future, the state pension alone will only ever provide some sort of safety net!